FUTURE TECHNOLOGY IN ESG
Writing the report for the 3rd ‘Future Technology Series’ for the London Technology Club (www.londontechnologyclub.com) we outlined how around the world we face urgent social and environmental challenges – climate change, structural inequalities, environmental degradation, aging populations, amongst many. Confronting these interconnected and complex issues will require trillions of investment – and much more innovative, and commercial, solutions to these issues. Here private capital is embracing a new role and mindset.
The full report can be uploaded from the LTC website CLICK HERE published in December 2021.
British greentech billionaire Stephen Fitzpatrick recently said:
“Good for the world is good for business”.
We are past the debate about whether business needs to be good for the world. But defining the ‘what’ and ‘how’ of good is something the world struggles with.
In 2019 we wrote The Future Technology in Philanthropy report, one of five reports that year focusing on how technology would impact topics our members are passionate about – with Formula One, Art, Longevity and Wine being the others. It was clear in discussions around the report that the boundaries were blurring around sustainable investing, impact and philanthropy. ESG came up a few times in discussion. Now it comes up in discussions with our members more often than not.
An estimated $30 trillion of assets are invested worldwide that rely in some way on ESG information, a figure that has grown 34% since 2016.
“We have crossed the Rubicon. You will be hard pushed to find a corporate company or financial institution that hasn’t had the discussion about ESG in the boardroom”.
For the world’s biggest asset managers, such as BlackRock, Vanguard and State Street, ESG is universally top of mind. For policymakers and regulators, ESG makes for increased accountability and legislative pressure. For analysts and researchers, they are providing robust, decades-long evidence of a positive correlation between better corporate ESG performance and stronger returns. Legislative pressure is growing alongside finance driving change.
We can no longer look only at financial returns in isolation. Investment decisions can be enhanced by effectively using non-financial information about an organisation’s operating practices around material ESG factors. With every business owner being accountable over ESG issues, the cost of ignoring it heightens the risk for all. But the VC industry is slightly later to the party. We believe, however, that we are past the time to ‘wait and see’ if ESG integration is a worthwhile undertaking for investors.
The report highlights the need to accept this is a positive evolution. The investment world however must realise it needs to walk before it can run. Success must be completely aligned with society’s success in addressing the UN SDGs and systemic social or environmental challenges… for profit, but not just for profit. But this report also highlights that there is work to be done.
To paraphrase Phoebe Stone from LGT Vestra, featured later in the report: technology in the future will move ESG from company pledges to accountability, accessibility and data aggregation.
“Those who are not integrating ESG into the DNA of their business practices will not be able to build sustainable businesses. VCs are seeing that there are business opportunities."
VCs are seeing this priority as a business opportunity. The conversation is changing from awareness and disclosure around ESG to accountability and action. Commitments to timelines, milestones and delivery. Consumers and employees are expecting change and impact. No more lip service or greenwashing. Words from the boardroom of corporates and investment houses now need to have led to impact.
Leaders are turning to technology for the solutions. This report looks at what technology will impact the integration of ESG within business, particularly for investors.